London Daily

Focus on the big picture.
Wednesday, Jan 07, 2026

Bank of England policymaker says rates could rise again in May

Bank of England policymaker says rates could rise again in May

Catherine Mann argues that soaring energy and food prices will persist even if consumer demand weakens
A senior Bank of England policymaker has said Britain’s central bank could raise rates again next month to combat the risk of high inflation persisting into 2023.

Catherine Mann, a former Citigroup economist who joined the BoE’s nine-strong monetary policy committee (MPC) last year, said on Thursday that soaring prices of energy and food will persist next year, even if consumer demand weakens.

Some economists have forecast that the UK economy will shrink in the second quarter and possibly fall into recession following a collapse in consumer and business confidence in the wake of Russia’s invasion of Ukraine that is likely to worsen shortages of goods and push inflation to fresh highs.

However, Mann said it was important for the central bank to calm inflation expectations, which were likely to drive demands for higher wages, pushing inflation even higher.

“The domestic inflation ratchet … has been my central concern,” she said in a speech.

In February when the MPC voted for a 0.25-point increase in the base rate she voted with a minority for a sharper 0.5-point rise. Last month she voted with almost all other members for a 0.25-point rise, taking the base rate to 0.75%.

She said: “Monetary policy needs to keep inflation expectations anchored; by doing so now, less tightening will be required later, when demand may still be weak.”

The BoE will meet on 5 May to decide on the path of interest rates at a time when most households have begun to absorb a rise in national insurance contributions and a freeze on income tax thresholds that will push hundreds of thousands of taxpayers into higher tax brackets.

Inflation hit a 30-year high of 7% in March, and the BoE last month warned that the bigger-than-expected pickup in prices would squeeze growth later this year.

However, Mann said it was not obvious to her that this fall in consumer demand would come soon enough to prompt businesses to rein in forthcoming price rises.

“Tracking these price expectations and forecast revisions is of paramount importance since inflation ultimately is due to firms systematically able to raise their prices,” she said.

Moreover, staged energy price increases designed to smooth the recent shock increase in wholesale costs would extend the period of high inflation. “The underlying inflation ratchet associated with lagged CPI [consumer price index] in firms’ pricing expectations will imply more persistence in keeping inflationary pressures above target,” she said.

Financial markets expect Mann and the rest of the MPC to increase the base rate to 2.25% by the end of the year. However, many economists expect the biggest collapse in real disposable household incomes since records began in 1948 to force a U-turn.

Samuel Tombs, chief UK economist at the consultancy Pantheon Macroeconomics, said: “We doubt the MPC will be so cavalier as to hike bank rate to 2.25%.” He said a 0.25-point rise in May and another in August would be the most UK borrowers could expect as the economic situation worsened.

Danny Blanchflower, a former MPC member and professor of economics at the US Ivy League university Dartmouth College, said the BoE would be blamed for depressing household incomes at a time of rising poverty.

Mann’s concern that inflation would persist, driven by an explosion in wage demands, was based on “no evidence”, he added. “There is nothing in the survey evidence to show that households or financial markets believe inflation is going to last and no evidence that workers have the clout to increase wages by more than inflation.

“All the evidence points to there being a recession around the corner driven by higher taxes, rising energy and food costs and an evidence-free increase in interest rates.”
Newsletter

Related Articles

0:00
0:00
Close
UK Data Watchdog Probes Elon Musk’s X Over AI-Generated Grok Images Amid Surge in Non-Consensual Outputs
Prince Harry to Return to UK for Court Hearing Without Plans to Meet King Charles III
UK Confirms Support for US Seizure of Russian-Flagged Oil Tanker in North Atlantic
Béla Tarr, Visionary Hungarian Filmmaker, Dies at Seventy After Long Illness
UK and France Pledge Military Hubs Across Ukraine in Post-Ceasefire Security Plan
Prince Harry Poised to Regain UK Security Cover, Clearing Way for Family Visits
UK Junk Food Advertising Ban Faces Major Loophole Allowing Brand-Only Promotions
Maduro’s Arrest Without The Hague Tests International Law—and Trump’s Willingness to Break It
German Intelligence Secretly Intercepted Obama’s Air Force One Communications
The U.S. State Department’s account in Persian: “President Trump is a man of action. If you didn’t know it until now, now you do—do not play games with President Trump.”
Fake Mainstream Media Double Standard: Elon Musk Versus Mamdani
HSBC Leads 2026 Mortgage Rate Cuts as UK Lending Costs Ease
US Joint Chiefs Chairman Outlines How Operation Absolute Resolve Was Carried Out in Venezuela
Starmer Welcomes End of Maduro Era While Stressing International Law and UK Non-Involvement
Korean Beauty Turns Viral Skincare Into a Global Export Engine
UK Confirms Non-Involvement in U.S. Military Action Against Venezuela
UK Terror Watchdog Calls for Australian-Style Social Media Ban to Protect Teenagers
Iranian Protests Intensify as Another Revolutionary Guard Member Is Killed and Khamenei Blames the West
Delta Force Identified as Unit Behind U.S. Operation That Captured Venezuela’s President
Europe’s Luxury Sanctions Punish Russian Consumers While a Sanctions-Circumvention Industry Thrives
Berkshire’s Buffett-to-Abel Transition Tests Whether a One-Man Trust Model Can Survive as a System
Fraud in European Central Bank: Lagarde’s Hidden Pay Premium Exposes a Transparency Crisis at the European Central Bank
Trump Announces U.S. Large-Scale Strike on Venezuela, Declares President Maduro and Wife Captured
Tesla Loses EV Crown to China’s BYD After Annual Deliveries Decline in 2025
UK Manufacturing Growth Reaches 15-Month Peak as Output and Orders Improve in December
Beijing Threatened to Scrap UK–China Trade Talks After British Minister’s Taiwan Visit
Newly Released Files Reveal Tony Blair Pressured Officials Over Iraq Death Case Involving UK Soldiers
Top Stocks and Themes to Watch in 2026 as Markets Enter New Year with Fresh Momentum
No UK Curfew Ordered as Deepfake TikTok Falsely Attributes Decree to Prime Minister Starmer
Europe’s Largest Defence Groups Set to Return Nearly Five Billion Dollars to Shareholders in Twenty Twenty-Five
Abu Dhabi ‘Capital of Capital’: How Abu Dhabi Rose as a Sovereign Wealth Power
Diamonds Are Powering a New Quantum Revolution
Trump Threatens Strikes Against Iran if Nuclear Programme Is Restarted
Apple Escalates Legal Fight by Appealing £1.5 Billion UK Ruling Over App Store Fees
UK Debt Levels Sit Mid-Range Among Advanced Economies Despite Rising Pressures
UK Plans Royal Diplomacy with King Charles and Prince William to Reinvigorate Trade Talks with US
King Charles and Prince William Poised for Separate 2026 US Visits to Reinforce UK-US Trade and Diplomatic Ties
Apple Moves to Appeal UK Ruling Ordering £1.5 Billion in Customer Overcharge Damages
King Charles’s 2025 Christmas Message Tops UK Television Ratings on Christmas Day
The Battle Over the Internet Explodes: The United States Bars European Officials and Ignites a Diplomatic Crisis
Princesses Beatrice and Eugenie Join Royal Family at Sandringham Christmas Service
Fine Wine Investors Find Little Cheer in Third Year of Falls
UK Mortgage Rates Edge Lower as Bank of England Base Rate Cut Filters Through Lending Market
U.S. Supermarket Gives Customers Free Groceries for Christmas After Computer Glitch
Air India ‘Finds’ a Plane That Vanished 13 Years Ago
Caviar and Foie Gras? China Is Becoming a Luxury Food Powerhouse
Hong Kong Climbs to Second Globally in 2025 Tourism Rankings Behind Bangkok
From Sunniest Year on Record to Terror Plots and Sports Triumphs: The UK’s Defining Stories of 2025
Greta Thunberg Released on Bail After Arrest at London Pro-Palestinian Demonstration
Banksy Unveils New Winter Mural in London Amid Festive Season Excitement
×